The Associated Press reports that the Israeli government on Tuesday announced that it had picked developers for 486 new apartments in the Pisgat Zeev neighborhood after delays over pricing. Earlier, Israel approved 455 new apartments in the West Bank, the AP reported.

"While the government of Israel for the sake of the peace process is willing to consider placing severe limitations on construction in the West Bank, that does not apply to Jerusalem," government spokesman Mark Regev said. "The position of the government is that Jerusalem is and will remain the united capital of Israel."

Palestinians say Israel illegally annexed the West Bank and East Jerusalem after the 1967 war, a position backed by most of the international community and by multiple United Nations resolutions. Palestinians demand the return of that territory as part of their future state, and plan to establish their capital in East Jerusalem. (Click here for a map of East Jerusalem from Palestine Monitor.)

The Jerusalem Post , a conservative newspaper, played down the new settlement authorizations, reporting that they would not derail talks with the US, and that diplomatic efforts would go on as planned.

"The settlements aren't the be-all, end-all" of American policy efforts, one State Department official told The Jerusalem Post on Tuesday. "Our ultimate goal [is] to create the conditions for negotiations."

The official said that while the new West Bank construction didn't help reach that goal, "this doesn't mean we're going to stop working toward setting the conditions for negotiations."

The EU also reiterated its call on Israel to immediately end settlement activities, including in East Jerusalem and including natural growth, and to dismantle all outposts erected since March 2001.

"Settlements are illegal under international law and constitute an obstacle to peace. The European Union reiterates its call on Israel to immediately end settlement activities, including in East Jerusalem and including natural growth, and to dismantle all outposts erected since March 2001," the statement also said.

Israel's ties to Europehave become increasingly strained in recent months. In addition to the EU's harsh condemnation of new settlements, the Associated Press noted that Sweden is in a "nasty diplomatic row" with Israel, Norway has decided to divest from an Israeli defense contractor, and talks on closer EU-Israel trade relations have been put on ice.